Senate Democrats Ask GAO to Examine 'Royalty in Kind' Program

A pair of Senate Democrats yesterday asked the Government Accountability Office to study the Interior Department's "royalty in kind" program to assess the merits of expanding the oil and gas royalty collection system.

Senate Energy and Natural Resources Committee Chairman Jeff Bingaman (D-N.M.) and Forests Subcommittee Chairman Ron Wyden (D-Ore.) want GAO to investigate the Minerals Management Service program, which has been under fire and allows the agency to collect royalty payments from companies in the form of oil and gas rather than cash.

The senators cited the growth of the royalty-in-kind program, the potential effect on the U.S. Treasury and past record-keeping problems with MMS as justification for the inquiry. GAO reports in 2003 and 2004 revealed MMS was unable to provide full and accurate data on the program's costs, total revenue or savings over cash royalties.

"Every time they look at the program ... [GAO] can't get from Minerals Management full and accurate data," Wyden said during a committee hearing on Interior's fiscal 2008 budget request yesterday. "This is the big program going forward."

Wyden added that 80 percent of Interior's Gulf of Mexico oil and gas receipts will be made by royalty-in-kind payments by 2009. "I really do hope the department will now make this an urgent priority," he said.

Interior Inspector General Earl Devaney is also investigating the RIK program, at the request of Interior Secretary Dirk Kempthorne. Several MMS auditors have sued various oil companies, charging they shortchanged MMS in their oil and gas royalty payments, and Kempthorne said he wants the IG to determine why action on the RIK payments was not taken by MMS superiors.

"I've asked the IG to make the determination why did they feel the need to go that route," Kempthorne said. "That ought not to have been the normal next step in that case."

Kempthorne wants to wait for the IG report before taking any action on the RIK program.

"We are all desirous to get a conclusion," he told reporters. "What is at play here, what steps need to be taken, what corrections, if any, then we want to move aggressively."

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Company: Minerals Management Service (MMS) more info
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